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Hipgnosis Songs Fund has in the present day (July 14) printed its full-year monetary outcomes for the 12 months to finish of March.
Earlier than we dig into that, and our headline above, the now-standard little bit of housekeeping:
- Hipgnosis Songs Fund (HSF) is the publicly-traded UK fund that IPO’d on the London Inventory Alternate in 2018;
- Its funding advisor is Hipgnosis Track Administration (HSM), which is run by Merck Mercuriadis and his group;
- Blackstone final yr privately invested a billion US {dollars} in a brand new Hipgnosis fund, Hipgnosis Songs Capital (HSC), along with making an undisclosed funding in Hipgnosis Track Administration;
- The latter firm (HSM) shouldn’t be solely tasked with discovering catalog acquisition alternatives for each HSF and HSC, but in addition with maximizing returns from their owned catalogs vis sync, advertising, streaming and many others.
What was notably fascinating about Hipgnosis Songs Fund (the UK-listed entity) within the second half of its newest fiscal yr? It didn’t spend a single penny on catalogs.
Having revolutionized the catalog-acquisition market since 2018 – and been a serious catalyst in Wall Avenue’s understanding of music as an “asset class” – HSF stood nonetheless (acquisition-wise) within the six months to finish of March 2022.
How do we all know? As a result of in its half-year fiscal report (overlaying the six months to finish of September 2021), printed final yr, Hipgnosis confirmed it owned 146 Catalogues throughout 65,413 songs.
And in the present day, in its full-year fiscal report (overlaying the 12 months to finish of March 2022), Hipgnosis confirms that it owns… 146 Catalogues throughout 65,413 songs.
None of it is a shock: As MBW defined to you final yr, Hipgnosis Songs Fund raised $215 million through the general public markets in July 2021 (which it then spent on catalogs from artists/writers just like the Pink Sizzling Chili Peppers, The Monsters & Strangerz, Christine McVie and extra).
After that increase, nonetheless, the corporate pledged it wouldn’t increase any extra capital on the general public markets till at the very least Q2 2022 (a interval we now discover ourselves in).
In the meantime, debt-wise, HSF seems absolutely leveraged underneath the present fiscal guidelines governing the working of its enterprise.
(In contrast, Hipgnosis Songs Capital, the Blackstone-backed non-public fund, has been busy shopping for catalogs by the likes of Leonard Cohen and Justin Timberlake for nine-figure sums in latest months.)
So right here’s the factor: For as soon as, for now, the fascinating facet about Hipgnosis Songs Fund (within the six months to finish of March) isn’t what it purchased; it’s how a lot it grew in worth.
In keeping with an impartial valuer quoted in HSF’s monetary filings (and as reported by MBW final yr), Hipgnosis Songs Fund’s portfolio of copyrights was value USD $2.55 billion on the finish of September 2021.
Six months later (as per HSF’s new annual report) and that very same impartial valuer now says that – as of finish of March 2022 – Hipgnosis Songs Fund’s portfolio was value $2.69 billion.
In different phrases, over the course of six months, Hipgnosis purchased nothing in any respect… and nonetheless grew in worth by $140 million.
Explains Hipgnosis Songs Fund founder, Merck Mercuriadis, in HSF’s new annual report: “Within the second half of our fiscal yr 2021/2022, as most world restrictions have eased and market progress has returned, we’ve now additionally proven that our acquisition technique and disruptive Track Administration method leaves us well-positioned to outperform.
“Our technique to accumulate solely probably the most profitable and culturally necessary Songs, together with 67 of the 271 Songs which were performed over 1 billion occasions on Spotify, has delivered like-for-like Streaming progress of 19% within the second half of our fiscal yr alone.”
“Within the second half of our fiscal yr 2021/2022, as most world restrictions have eased and market progress has returned, we’ve now additionally proven that our acquisition technique and disruptive Track Administration method leaves us well-positioned to outperform.”
Mercuriadis provides that this streaming progress “outperformed our Unbiased Valuer’s expectations, and along with the primary time recognition of the worth of income generated from the now established digital way of life platforms which have emerged, led to an annual enhance in our Operative NAV of 9.9%”.
One key issue within the progress of Hipgnosis Songs Fund’s worth: The agency’s annual report says that it noticed a “20% enhance of formal synch licences accredited within the 6 months to [March 31, 2022] versus the primary half of the monetary yr”.
A bunch of different monetary data is revealed in Hipgnosis Songs Fund’s new annual report, too.
Throughout the complete yr (to finish of March 2022), HSF’s gross income elevated by 24.7% to USD $200.4 million (31 March 2021: $160.7 million) partly as a result of catalogue acquisitions the agency executed within the first half of its fiscal yr.
Web income of $168.3 million elevated by 21.7% year-on-year (31 March 2021: $138.3 million), following royalty price deductions of $32.0 million (31 March 2021: $22.5 million).
And EBITDA elevated by 21.8% to $129.9 million (31 March 2021: $106.7 million).
HSF posted an working lack of $16.7m within the yr (see under).
Added Mercuriadis: “During the last 4 years we’ve acquired an incomparable portfolio of a few of the most profitable and culturally necessary Songs of all time, now valued at $2.7 billion. The distinctive power of our Catalogue is demonstrated by the 9.9% enhance within the Operative NAV to $1.8491 per share, as reported by our Unbiased Portfolio Valuer, and a Whole NAV Return of 14.2%. That is largely pushed by our iconic Songs outstripping the final market progress in Streaming, notably within the second half of 2021, offering validation for our funding technique.
“As we glance ahead, we proceed to count on sturdy world income progress pushed by the continued adoption of paid-for Streaming. Regardless of the macro-economic atmosphere, the attractiveness of the music Streaming proposition continues to develop.
“It’s the lowest-cost leisure subscription service and, with its providing of a close to full repertoire of world music, supplies probably the most complete providing of the on-demand, leisure subscription companies.
“This view is shared by the main voices within the sector, together with Goldman Sachs, who just lately upgraded their double-digit annual progress forecast by to 2030 of their gold normal Music In The Air: Music nonetheless sounds good in a macro downturn; elevating world trade forecasts report.”
Continued Mercuriadis: “With clear proof of a robust restoration in world Efficiency revenue, the latest CRB III willpower to extend Streaming royalty charges for songwriters, and potential for additional enhancements within the upcoming CRB IV willpower, all along with the extraordinarily sturdy progress in Streaming, I consider we’re wanting ahead to very engaging market situations.
“Given our incomparable assortment of iconic Songs, I consider Hipgnosis is completely positioned and can proceed to ship wonderful returns for our Shareholders.
“Thanks to our Shareholders in your unimaginable assist, our Board, brokers and the unimaginable songwriters who’ve entrusted us with their incomparable Songs.”
Beneath, taken from the Hipgnosis Songs Funds annual report – which you learn in full right here – you’ll be able to see everything of catalog acquired by the corporate so far.
Music Enterprise Worldwide
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